Smart Grids are from Mars and the Energy Industry is from Venus

Written by: Gary Michor and Ian Mundell

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 “Smart Grid,” a term we should all be familiar with by now, is the integration of technology – both new and old – within the industry and society. This integration actually simulates the laws of attraction. Generally speaking, in order for there to be attraction there needs to be desire, and we can all agree that there is a desire for things to be efficient and more streamlined, and therefore, there is attraction. More specifically, attraction between the energy world and technology is a smart grid. However, like any attraction, there are obstacles to overcome. This marriage of technology and energy has unique roadblocks to overcome and, unlike most other industries, it must endure the differences in state of minds to coexist.

As we have seen in other markets, new technologies can greatly enhance the energy industry and in turn evolve mankind. To illustrate what we mean, let’s look at the banking industry as an example. Banking has come a long way in a relatively short period of time; we have transitioned from walking down the street to get money from the local bank teller and writing our transactions down in a bank book to using technology that does almost every banking transaction for us. That being said, next time you take a plane to the other side of the planet and dispense money from an ATM, think of the technology and data that has gone into processing that transaction. It’s instant, efficient and seamless.

Much like the banking industry, the telecom industry has also moved forward with new technology. Starting with rotary phones with shared ringers and land lines, we now have wireless smart phones and applications that use the Internet to share voice, video, and screens anywhere in the world. So next time you pick up your smart phone (which for most people will be in the next few minutes) think of how far the device and the technology around it have come. Now imagine having to wait to see if the ring on your smart phone was yours or your neighbor’s.It’s a ridiculous thought, isn’t it?

As you read this article, markets are constantly interacting – effectively merging into one ecosystem where, among other things, smart phones now help manage your banking through apps. From this integration, the responsibility of market evolution has grown as it is no longer in the hands of the industry providers. Anyone with the technical know-how can build a mobile application that can add real value to the economy.

Keeping the previous observations in mind, when we look at the energy industry, we see international need for the same advancement. Unfortunately, it seems that while the world around us has changed, improved and integrated, the energy industry has willingly remained in past times.

As self-proclaimed energy industry experts that are deeply involved in the industry, we can tell you that the energy industry parallels both the banking industry and the telecommunications industry. In all three cases, there is a mix of regulated and non-regulated entities (all of which are prime markets for advancement and integration due to their size and scope), and they invoice the customer directly. So why has it been so difficult for the energy industry to keep up with everyone else? It’s because of the Venus and Mars phenomena.

We’re sure you’ve heard of the “men are from Mars, and women are from Venus” adage, but in case you haven’t, here’s a refresher. “Men are from Mars, and women are from Venus” is the idea that the differences between men and women are caused by the fact that they come from two different planets. This means that, for the most part, men and women do not behave, feel, think or respond in the same ways to the same situation. However, despite their differences, they find common ground.

How can this theory possibly relate to the energy industry? It appears that the energy market and a “Smart Grid” have different ways of seeing a future footprint in the world. To integrate everyone’s vision and to get “big data” solutions working, we need to find common ground so Venus and Mars can coexist.

Now let’s take a look at the differences between the players in the Smart Grid Industry. The providers of smart grid technology and the clients of smart grid (energy organizations) infrastructure have very different ways of thought.

Smart Grid Providers have the Following Thinking Patterns:

  • Highly specialized, using specific solutions to accomplish specific tasks.
  • Able to focus on narrow issues and block out unrelated information and distractions.
  • Narrowly focused on specific tasks or activities for long periods of time.
  • Able to separate information, stimulus, emotions, business relationships, etc. into separate algorithms to solve specific problems.
  • See individual issues and disseminate them into specific parts to provide focus to a problem.
  • With smart technologies being a pioneering industry, Smart Grid providers have huge incentive to be the first product installed so the solution captures unique information. (This creates real “stickiness” for the particular solution even if it is only used for a pilot.)
  • Have an aggressive behavior, and are more dominant and more narrowly focused on the physical aspects of getting into clients and getting data collected.
  • Have a dominant perceptual sense of technology vision, which typically oversells and under delivers as providers want to be part of a bigger picture to create a footprint in the relationship and use it to market pioneering technology (gain new untapped market opportunities).
  • Interested in high rate of returns and work in a very competitive pioneering market place looking for the “Big Win.”
  • Technologically savvy personnel that do not always understand the politics of their client.

An Energy Organization or Clients Such as a Utility, Transmission Operator or Generator have the Following Thinking Patterns:

  • Utilize significant portions of its resources on a variety of tasks to ultimately achieve a few key objectives; (i.e., keep the power flowing).
  • See everyday things from a broader, “big-picture” vantage point to achieve narrowly defined shareholder goals.
  • Focus on their own needs and have very little use of others outside their jurisdiction unless directed by policy or regulation.
  • Equipped to divide their attention among multiple activities or tasks but have limited resources.
  • Have a tendency to not work together, although there is no real competitive reason as to why not.
  • Link everything together and, once things work, it is opposed to change.
  • Look at the idiosyncrasies within their territory and, once finely tuned to address them, will not sway too far as both the energy organization and their owners are not risk takers.
  • Historically trusted and influenced by policy change but also protected to continue to get their return by the regulators or market.
  • Happy to achieve a regulated rate of return
  • Well established functions and policies and most are given bonuses based on doing their job and protecting their ”turf”.
  • Manage aging workforce that is set in their ways.
  • Manage aging equipment that needs to be reliable and cost effective.
  • Prefer to maintain existing equipment vs. “leading edge” new technology.
  • Find technology as a day to day process vs. a tool to evolve
  • Generally are “old technology” savvy and relies on years of experience to do the job.

At the end of the day, differences between the smart grid and the energy operators increase because of the involvement of politics, attention and “hype” around the industry. The real Mars and Venus issues lie in the fact that most energy organizations in the world that require technologies to evolve are blessed with multi-level political systems. These systems are run by people elected into positions (not energy experts) who expect movement on items within their political term.

* * *

Politics and Smart Grid … Surprise!!! We see Venus and Mars here too

The hype and the politics are nowhere more prevalent than in the world of standards development, policy management, and standard setting organizations. The smart grid experts see a vision of an interoperable world where everything is interconnected and devices are happily talking to one another. This vision requires new standards, new equipment, new high speed processing and a new talent pool. Many energy organizations see little immediate value in this reconfiguration, instead preferring to remain in a status quo environment. No change actually protects the existing talent pool and is easier to manage. While predictive maintenance will promise increased cost effectiveness, the upfront investment can be costly; not only in financial terms, but because the new smart equipment requires a paradigm shift from the “always on” mentality to an operations and maintenance environment that more closely resembles a data center than a traditional operating company.

A related issue is where you find the experts to “assist” and advise the politicians in understanding what needs to be done. In almost all cases it’s the energy organizations with the existing subject matter specialists. When looking at the Venus traits, are they really in a position to think or act in a global manner that is best for Smart Grid and the long term growth of the market overall?

The past decade has seen innovation in one area, at least. The downsizing mythology has hit the smart grid arena. This isn’t so much reducing headcount however, but instead refers to what we might call mini-generation plants. “Distributed Generation” is flexible, and there are compelling benefits to be gained from producing electricity close to where it is needed. Throw together a few solar panels, plug in a turbine or two, and you can have your very own microgrid, say proponents. While it may not be quite as simple as that, done properly it can enhance localized reliability, increase security, and provide a company with intangible but valuable goodwill. What’s not to love? Should there not be a reason to bring Mars and Venus together? Should we not use our smart grid providers to help?

* * *

If Venus Talks and Mars Doesn’t Listen…?

The overriding obstacle can be summed up in one word – interoperability. It can be hard enough to get monitoring and control systems working at the best of times. Just try to get them working with multiple devices from different manufacturers and you’re asking for headaches unless there is a firm global result to achieve. We need these distributed generation plants (and all smart grid devices) to be interoperable and standards based, or the real benefits of smart grid will remain a distant dream. The “smart” grid will be doomed to remain in the “average” grid category.

When you first start talking to experts about smart grid, it’s like going on the first date; everything seems great. But what about the long term relationship? Without true interoperability, the smart grid won’t expand past a small submarket – even a territory – where vendors have “locked in” the solution with proprietary data storage. By opening a window for competing smart grid vendors, existing providers of communications solutions will be incapable or unwilling to adapt for fear of breaking the bond between the energy organization and the vendor.

In any good relationship, you have to talk, and the more you can talk the better the relationship will be. (It helps if Mars and Venus are talking the same language; smart grid manufacturers, take note!) Smart grid devices and systems generate data – lots of data. Reaping the best benefits from smart grid technologies will require data communications and storage, and for reasons of scalability, reliability, and good old-fashioned cost efficiency the smart grid standards of tomorrow will be based on the internet communications protocols of today. While that doesn’t automatically make something less secure, it does vastly increase the possibility of attack. One approach that might be cost effective is the idea of putting as much of the data processing as possible into the cloud. That, however, is an idea that is in its infancy. We suspect it would help if someone could come up with a clear definition of what “the cloud” actually means! Many new technologies and “buzz words” are not unique to the energy industry. Instead, they were originated by more advanced markets like banking, telecommunications and mobile computing.

Energy organizations do not have the understanding of how to advance. Remember the focus has to be on “keeping the lights on”. Smart Grid vendors have the knowledge and understanding because they are building and promoting the new electronic energy system. The concern is, can vendors be trusted. They are in it for themselves and don’t forget, if they don’t succeed they may soon be replaced.

So where do the elected parties get their information from so they can advise and assist? Like a marriage mediator, it’s usually somewhere in the middle. Do the politicians, elected officials, board members really have time to understand this before they make decisions?Remember they are gone in a few years and the next one drops in to visit.

* * *

Smart Grid is Everywhere, Don’t you See It?

Smart Meters are being added to the energy network everywhere. But what’s that all about? How smart are they? The actual fact is they have a lot in common and because of evolution they have increased in “smartness”. But they are reaching an end to their evolution and without access to other technologies there is little “smart” growth. The issue is not really the meters anymore; it’s the communications to the meters and the data collection infrastructure. The collection standards and methods are in most cases proprietary to the meter vendor. You buy a meter … you buy the collection solution too. Now-a-days metering companies are going one step further. Since they can’t easily integrate due to the lack of standardization, they are partnering up with individual up stream solution providers. This doesn’t help anyone. It’s a bit like an arranged marriage. Everything is done for you but you are not sure what you are getting into.

In the Smart Meter case, energy companies have in fact just married without dating. The utility, for example, is now hooked to the meter vendor and cannot change without huge cost to replace or duplicate the communications infrastructure. The data from the meter, although rich with information, is in some cases stuck in the metering system, as the upstream data collection solutions can’t handle the changes or increased “smartness”. Now who loses here? The Energy Company is now stuck in time; the upstream technologies can’t build a “universal” solution to meet many vendors. The vendor in fact is also at great risk as it is locked in to provide support on outdated systems. Even if the systems evolve the utility can’t afford the upgrade because it will add more costs in the “rate base”. We are all aware that the customer is starting to notice the added “regulated cost” of change. This awareness affects the elected official as they represent the user.But aren’t they the ones that keep promising smart grid?

With every relationship there is always the concept of short and long term security. “Mars and Venus” would never survive together in the long term without trust and the comfort of feeling safe. Let’s match this back to our topic – where is the promise of increased security for “Smart Grid”? As it happens, distributed generation is a prime example. If a company has a lot of small and independent (albeit interconnected) generation, you now have the ability to isolate one part of your “network” which is under attack while the others continue to operate securely. This is a huge change in fundamental business processes, but the theory is very well understood by your cybersecurity experts.

But there’s another component of the Mars and Venus analogy in this instance. As usual, we need to follow the money. Consultants and vendors love standards because they see marketing possibilities, new business opportunities especially for those consultants working on standards development. Nothing like creating your own market when you’re the expert on a newly minted standard by virtue of the fact you helped write it. Energy companies, on the other hand, see new and untested equipment which will be expensive to install and whose promised benefits are unproven. They also see it as a change to their process oriented, risk-averse life. Why rock the boat when it’s working just fine for me today. The issue is it needs to work for more than just one party, one jurisdiction, one market or sub market. It needs to be a “Smart Grid”, and that Smart Grid needs to be interoperable. Otherwise it’s just a very “Mediocre Grid”.

* * *

Standards and Mars and Venus. Are they Headed for Divorce Already???

A good example of standards is the creation of Ontario, Canada’s electric retail market. The retail communications and business standards were built by the electricity community, BUT it had the regulatory entity (The Ontario Energy Board) oversee it and step in when vendors and energy companies collided. What came of this? A secure communications protocol and XML standard that, at that time, found agreement amongst around 100 Utilities and a handful of energy retailers. The solution linked 21 different Customer Information Systems focused on low barriers to entry, enabling the smallest utility or retailer to participate. It went into production in 2002 and was a complete success from a data processing point of view. It worked with very few snags and is still in production today. The standards were given to the OEB and made public. Sounds real good, right?

Well, the standards were never really used anywhere else other than Ontario. In fact, when building out the Smart Grid Infrastructure this standardized infrastructure was ignored, with the result that proprietary solutions manage the rest of the Ontario market. We’re still not quite sure why this came to pass. Perhaps the solution providers wore nicer suits and had a better “pick up line”.

Multiple retail markets were later opened using older and more expensive processes including EDI. Why? Unfortunately, Ontario never really promoted the good things that were done, simply because there was no incentive to do so. Vendors in other areas of the world had no need to promote something new because it would require changing of their systems and allow other vendors (competitors) to enter the market. At the end of the day every standard takes a lot of political might to put through; why rock the boat for innovation if the jurisdiction will work with the one that the locals like? In short, why would you promote something different?Let us answer this for you.“Smart Grid is interoperability and that means the whole market independent of regulatory jurisdiction.” It’s a harmonization between Mars and Venus .

If the Ontario Standard and other standards in the world were looked at in a more global mindset for a true “Smart Grid”, the market could have continued development on a strong standard base and evolve. We are not saying the Ontario Standard would still be around but a hybrid, more flexible standard would have evolved and other markets including Ontario could take advantage of it to work on a focused road map for the future. The industry has to look past short term plans to meet short term goals. We need to see past the “dating stage” and look to tomorrow’s goals. A true roadmap that brings Mars and Venus together in a marriage that really works.

* * *

Information Integration. What is it Really in the End?

Possibly the biggest benefits could come from the integration of retail and wholesale markets. You could have an app on your smart phone that hooks into your home energy management system and programs your personal energy profiles. Your home energy management system could easily communicate with the local utility, the local utility could communicate with the aggregator, and so on, so that a Demand Response event ripples down to those consumers who’ve opted in to a program allowing their air conditioners or central heating units to cycle periodically during times of peak demand on the grid. This would be based on your personal comfort profile and would tie in to the grid operator’s signals driven by locational marginal prices on the grid in real time.

Just think, real-time measurement of electrical quantities could be sent across a wide area network and monitoring systems would detect a disturbance and block off that segment of the grid before it could spread more widely. More and more townships would begin to enjoy the benefits of a municipal microgrid, with reliability ensured by plug-in vehicles (belonging to you, your neighbors, even your parents visiting from out of town) participating in frequency regulation markets, unhampered by territorial boundaries.

Of course, there are legitimate concerns about privacy and security. Standards have to be developed with confidentiality, integrity, and availability – in place from the outset. Data communications have to be confidential – information isn’t shared unless the owner gives permission. There needs to be an assurance of integrity – data isn’t changed unless it’s supposed to be changed. And data has to be available – the people who genuinely need the data to make decisions or manage infrastructure issues can get it when they need it and not just in their own system. Sounds complex right? Many in the energy industry would secretly tell you it’s impossible. But other markets interoperate together. It just takes a relationship that puts Mars and Venus aside in the short term to plan for the future.

Realizing the full magnitude of this ambitious vision requires one family, of smart grid standards. It could be done – it really could. Think of the ATM example we talked about already. This worldwide network will allow you to use your bank debit card, linked to a Canadian or U.S. bank, to get Yuan in China within seconds. Could the same happen for smart grid? Yes – but it needs a concerted effort. Some standards will fail, some will evolve, and some will meander aimlessly through the winds of bureaucracy and self interest. But there are enough smart people who understand the issues and see the promise to make this work.

* * *

In the End

So you have local, regional, state and federal parties all wanting action with different agendas. There is no “global” entity to manage change. The truth is there is no market desire for a single change agent, because each party wants to have complete localized/ jurisdictional rights. Recently, we’ve heard of arguments between regulated parties with respect to who owns the customer data. Let’s be clear, in all other markets it’s the customer; the customer owns their own data. Giving up the assumed rights of data causes issues, internal fighting and in-turn a desire to reinforce data islands to protect historic rights.

On top of all of this, now add to the mix politicians throwing around “big money” on “big data” integration. It’s estimated that spending will be in the tens of billions of dollars for the next 10 years on smart grid technology. It’s like telling a company involved or interested in smart grid, “Have a shower, put on your best suit and then come tell me a little about yourself. I might like you and you might get lucky!” It’s a great teaser line to get the vendors to the “party” especially if the vendor is aggressive and is more focused on the physical aspects of getting in and getting information collected first.

The fact is, we want and need a smart grid. We have forgotten the real issue at hand. We need data. We need it for so many reasons, and we can use it in so many ways – many of which we don’t even realize yet. Ultimately, it’ll be cheaper to operate and maintain, more reliable, with better security for the digital age, and will be the best solution for both the customer and the industry. That’s not to say it’ll be easy to get there, but it will be worth it.

We need to realize that spending money on a pilot project or a market setting without a global vision or standardizing the data first is wasteful and in most cases counterproductive for all those involved. Nowhere is this more true than for generators, where pilot projects can be orders of magnitude more costly than in other industries. It may satisfy the politicians, energy organizations, or even the smart grid organization that gets the multimillion-dollar deal, but it doesn’t help the energy market overall. We are not any closer to achieving our goal to be as advanced as the other industries. It’s almost like the competition between men and women in society. Going back to the Mars vs. Venus theory, the question still exists as to why genders respond so differently to very similar situations.

The energy organizations and smart grid providers have come a long way, but they have yet to find a solution. Both parties are interested in what is best for them rather than what is best for the energy industry as a whole. This really isn’t that far from what you’d get if you were to ask any individual in today’s society what gender they think is the smarter one; it would always be a biased opinion based on their own best interest.

Reality check: We need standards. Start off simple and advance them from there. We need policies that are global to help guide our standards. We need policies that require data solutions for smart grids to be open, easily interpretable and we need real support to ensure interoperability of data. Just like equality was created in the workplace to support both men and women ensuring they do their best rather than focusing on the differences between each other. Those are standards that were put into place because it’s the right thing to do.

This may be easier said than done. In the U.S., the Energy Independence and Security Act of 2007 (EISA 2007) sought to encourage rapid identification and closure of technical gaps in existing smart grid interoperability standards. Let’s fast forward to 2011. The Federal Electric Regulatory Commission was presented with a set of five so-called foundational standards. They rejected them with the note that there was no consensus over the proposed standards. These standards addressed such items as data exchange for control centers and power plants, explicitly supporting storage, distributed energy resources, and substation automation. Back to the drawing board people.

We don’t need self-interest to come first and we really don’t need politicians to be blindsided by companies that say they can create a dress that looks good on anybody. We all know that one size does not fit all! We need a market that allows the small creative technology provider to be in the market with the big guys. We need to get to a point where the data is not locked in once the smart technology is implemented. The companies in the market need to manage the Venus and Mars phenomena, just like society has come to. This is not rocket science, but we need things done now before we waste time and money that, in most cases, comes from the public’s pocket. Let’s be smart and fix the smart grid problem.

June 9th, 2014

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